6 Comments

I’m sorry the November note didn’t get through to you. We didn’t receive any bounces from your email address. We just now sent you the new password, so you should be all set. Please let me know if there’s anything else you need. It’s a pleasure having you onboard the letter!

Thank you Mr . Kelly for imparting your knowledge into such an easy read and understandable format. I feel like a more confident investor moving forward having read your book. I wish you much succes and look forward reading your future books.

My question to you is: How do you keep a healthy, unbiased perspective when picking stocks in this current day and age of corrupt corporate executives? I just finished reading a good article in the current edition (Feb 18 edition) of Barrons where Ben Stein wrote in his article “one of the smartest businessmen I know, a former high executive of a pubicly held entertainment company once asked me, ‘What is the first duty of a corporate CEO?’ Mr. Stein replied, “To maximize the utility of shareholders.” The response he recieved was, “You poor child. No, the CEO’s first duty is to make himself as rich as he can as fast as he can with the shareholder’s money.” Mr stein went on to say, “I’m sad to say that decades of observation have confirmed that his conclusion is correct all too often.”

How can we, as investors, be mindful of this observation when choosing our stocks so that we invest in companies that will use our invested money wisely?

Thank you for the kind words, Norman! It’s a pleasure to welcome a new reader.

There’s a certain amount of corruption that we’ll never be able to eliminate, true, but studying business results and stock trends can still guide us to stories that provide good odds of price growth in the future.

If we know an industry’s P/E ratio and a company’s historical P/E ratio, and see that it’s currently 40 pct below that ratio, for example, we may conclude that investing money now buys us good odds of the ratio reverting to its mean and, therefore, growing our investment. This process can happen even if the CEO is a crook.

Of course we should strive to avoid crooks, but we shouldn’t let our inability to do so perfectly steer us clear of opportunities in stocks.